So this morning as I sit less than 20 miles from the US Capital Building, the House of Representatives is about to vote on the Financial Bailout plan. While many think this is a good thing, I think that if this bill passes it is going to signify the beginning of the REAL financial crisis of the US economy. Why do I think this? Well because now the US Government is going to help all of the companies and individuals that started this whole crisis by setting a precedence that if you make a bad decision the US Government will be here to save you.
Lets take for instance the house that I live in now. It was built in 2005 which was the height of the real estate market boom here in the DC area. The couple that had the house built paid $745,000 for it and my guess is had one of the crazy mortgage loans that offered 110% financing, interest only payments, zero down payment and an interest rate of around 4%. If this was the case the couple financed $819,500 and had a mortgage payment of around $2,731/month. The couple closed on the house in March 2006. Now fast forward one year to March 2007. Their loan adjusts back to a 30-year fixed loan at a rate of 5.5%. Their payment jumps to $4,650/month. Panic sets in and foreclosure looms for this couple. It is about this time the real estate bubble is bursting because this same situation is happening for millions of other people around the country who were roped into these ridiculous loans.
Now it is September 2008 and here we sit. Banks or going under, the stock market is tanking and all of this because the banks and creditors decided it was OK to give consumers loans that they really could not afford. I am not blaming banks 100% for this. Why a consumer did not read the fine print of these loans or did not have enough common sense to see that in 12 months their loan payments were going to almost double is beyond me. It is however apparent to me that banks were making fortunes off of peoples stupidity. Now the Government wants to help all of the individuals involved which really ticks me off.
My personal opinion is that the Government needs to just let this whole situation correct itself. While I am mad that all of these big bank CEO’s and Executives are walking away with millions and millions of dollars I have little sympathy for all of the consumers that were sucked into the credit market. If the bailout plan passes, the economy is going to take longer to recover because when the Government intervenes, it always takes away from the natural supply and demand of the economy.
OK my rant is over. Now I have no choice but to leave things in God’s hands. It is great to have an opinion but God is untimately in control and knows exactly what is going to happen. I do pray for all of us during this crazy time.